Block
Chocolate
May/June
2002
Family
favourite chock
full of profit
Eaten in moderation, chocolate is good for us. It contains
minerals the body needs to stay healthy, as well as more disease-fighting
anti-oxidants than tea! It's also extremely good for a C-store's bottom
line...
Mary Poppins may have been right when she suggested that
a spoonful of sugar helps the medicine go down - judging by the sales
figures, few of us can make it through the working day without the help
of chocolate.
According to industry figures from AC Neilsen, block chocolate
posted sales of $389,137,800 last year. The petrol and convenience sector
was responsible for $16,251,100 of those sales, which represents a 16
per cent increase on the previous year but obviously there is room for
even more growth and more profit, or so the chocolate makers believe.
According to Mark Smith, MD of Confectionery for Cadbury
Schweppes, a shift in consumer shopping habits and initiatives of manufacturers
to change packaging to suit the impulse market are the main reasons
the block chocolate segment has thrived in recent times.
"Convenience retailers have proven that offering
block chocolate as an impulse purchase lifts their average basket spend
per shopper and can offer greater dollar margins than most other impulse
products," Mr Smith says.
There is also another explanation why the block chocolate
segment has grown - competition. There has been a lot of activity involving
relative newcomers such as Dove, Wonka Mud Sludge and Toblerone, but
all brands within the segment have grown and thrived under the increased
activity.
The category is divided into three chocolate types - milk,
dark and white - all of which are available as either solid blocks,
filled blocks with soft centres or chocolate with inclusions such as
fruit and nuts.
Stock a Broad Range
With an important part of the appeal of blocks lying in the huge variety
the category offers, it is important that retailers stock a broad range.
Sarah Mawson, Brand Manager, Chocolate Blocks, for Nestle Australia,
says there's some great opportunities for all players.
"Milk is the largest chocolate segment with the top
selling variants being the solid block and Fruit & Nut varieties,
but both the white and dark chocolate block segments have experienced
significant growth over the course of the last year and are currently
outstripping the category, growing at 120 per cent and 45 per cent respectively
within the convenience market.
"However they are still underdeveloped within this
market which means development of these segments represents enormous
growth potential for retailers," Miss Mawson says.
Dark chocolate is the second largest segment - Nestle
CLUB dominates this market with six variants in the range. The third
segment - white chocolate - has been experiencing enormous growth recently.
Nestle has taken advantage of its popularity by launching MILKYBAR Creamy
Caramel and Creamy White, the only filled white products on the market.
So, not only is it important to have a variety of stock
in white, milk and dark chocolate on offer, it would seem that certain
styles and sizes work better in C-stores than others.
The key difference between block chocolate purchases in
supermarkets and C-stores is that in P&C, says Mars Confectionery
Australia's (MCA) Trish Evans, the segment behaves more like a singles
market with nearly 42 per cent of value sold in blocks under 80g.
In the grocery channel, just over 10 per cent is in these
smaller products. And even if a family block is being bought at a C-store,
it's more likely to be in smaller packs such as Cadbury's 150g blocks,
than the traditional grocery packsize of 250g, says Ms Evans who is
Chocolate Group Franchise Manager for MCA.
"For that reason it's important to stock a range
of flavours in singles, as consumers are choosing their own personal
favourites as opposed to a block to share with the family.
"New flavours such as DOVE Cookies & Cream and
Cadbury Mousse appeal to this consumer desire for variety when they're
buying a product on impulse for themselves," Ms Evans says, suggesting
there is a relatively simple way to work out what to stock.
"There are approximately 300 SKUs sold through C-stores,
but stocking the top 50 SKUs will offer your customers a good selection
of the most popular and well advertised flavours and brands."
One stand-out success in a smaller size has been the King
Size bar which grew at 103 per cent last year. Riding on the success
of that growth, Cadbury Schweppes introduced a 75g 'on the go' King
Size Bar format.
"This version of Australia's most loved chocolate
became an instant hit with the convenience shopper specifically targeted
at males aged from 15 to 34. It made sales of $1.2 million in seven
months, in the convenience channel alone," says Cadbury Schweppes'
Mark Smith, who has also witnessed the popularity of the 150g bars within
the convenience channel.
Recognising the importance of the blocks category, Nestle
has relaunched its entire range this year with new packaging and a special
new 'logo' - a chocolate swirl which is coloured according to the type
of chocolate inside.
"Block chocolate is seen by consumers as offering
great value," says Nestle's Sarah Mawson.
"They're large and last a long time - in theory,
if not in practice! They are reasonably priced and always seen as affordable
and block chocolate suits a wide variety of occasions. And customers
appreciate the fact that there is a huge range of blocks available."
When it comes to maximising cash register results from
this appreciation, Miss Mawson suggests that, given the strong growth
taking place, and that variety is a key to stimulating sales, retailers
need to have adequate offerings of both white and dark chocolate varieties,
as well as the traditional milk chocolate, to ensure they're meeting
customer needs.
Encourage Combination
Purchases
"Retailers should group products together based on the
chocolate type, for instance dark with dark, white with white, to assist
shoppers in making their selection. It's important to stock a suitably
broad range to entice your customers."
Cadbury Schweppes' Mark Smith believes sales can be increased
by encouraging combination purchases with other categories. Traditional
take-home purchases are the 150g and 250g blocks.
"Packaging these with other take-home products such
as 1.25L soft drinks and 100g chips means the retailers can give their
customers a reason to purchase them together.
"A recent promotion tailored specifically for the
needs of the convenience shopper featured a Schweppes drink and Cadbury
block combo. It led to the highest dollar volume return for a single
promotion for the year. This is the result of offering customers a meal
or snacking solution and using block chocolate as the attractive, indulgent
component," Mr Smith says.
The experts say they have no doubt that block chocolate
will continue to grow over the next few years and they acknowledge that
advertising and new product lines are the key tools to drive this growth.
All manufacturers have new lines planned to renew and maintain consumer
interest in block chocolate.
Make the Most of Promotions
They're also spending money promoting those new lines and
the old favorites. For example, Cadbury Schweppes has planned an investment
of more than $5 million in media to push the block chocolate market
this year while MCA is investing more than $4 million behind DOVE in
2002.
"It's imperative that convenience stores get their
share of the increased demand, fully capitalising on this highly impulsive
purchase," says Cadbury's Mark Smith.
The experts suggest that retailers keep in touch with
their suppliers so they can be forewarned of new products, advertising
campaigns and up-to-date point-of-sale material. Combining merchandising
with distinctive POS and a call to action can lead to a significant
increase in sales.
"We recently undertook a trail through a major convenience
account where take-home products were merchandised together with a call
to action. Products were sold at full price, meaning the retailers were
able to maintain full margin on these high dollar items. The results
showed that 250g block sales increased by 250 per cent and two-litre
soft drink sales increased by 300 per cent," says Cadbury's Mr
Smith.
There's simply no arguing that block chocolate is an impulse
product that can offer strong returns. And what a sweet thought that
is.